Australia will introduce new legislation to amend credit laws, requiring buy now, pay later (BNPL) providers to hold an Australian credit licence and comply with existing credit laws, regulated by the Australian Securities and Investments Commission (ASIC).
Currently, the majority of BNPL products are not covered by the National Consumer Credit Act, meaning consumers do not have the protections, such as ability-to-pay checks, that apply to credit cards and loans.
In addition, a new category of “low-cost credit” will be established under the Credit Act to reflect BNPL’s lower risk and cost compared to other forms of credit.
BNPL providers need to assess whether their products are appropriate and affordable for consumers.
If consumers get into trouble, they may not have access to effective dispute resolution or hardship procedures.
The government acknowledges that BNPL brings competition to the credit market, gives consumers access to small amounts of credit and contributes to the wider economy.
According to the Australian Financial Industry Association, the BNPL sector supports more than 120,000 local jobs and contributes up to A$18.4 billion to GDP.
A 2022 survey by Good Shepherd revealed that 84% of financial practitioners report that their clients are opening additional BNPL accounts to manage their debts, leading to unmanageable debt spirals.
New laws aim to balance consumer protection with innovation and competition. The Australian Government’s measures aim to prevent the harm caused by harmful lending practices, while preserving the benefits of BNPL services.
Stephen Jones
Deputy Treasurer and Minister for Financial Services, the Rt Hon Stephen Jones MP, highlighted the Government’s commitment to protecting consumers.
“The Government is working hard to protect consumers from financial harm and we want Australians to be able to enjoy the benefits of BNPL knowing that there are strong consumer protections in place.”
If it looks like credit and acts like credit, it should be regulated as such. Our changes are balanced and proportionate and preserve the benefits delivered to consumers by BNPL products.”
Featured Image Credit: Free Pick
